Persistent fog reduces activity at Cheniere's Sabine Pass LNG terminal

Houston — Natural gas deliveries to Cheniere Energy's Sabine Pass LNG export terminal in Louisiana fell sharply Thursday as dense fog continued to limit tanker movements in the area near the facility.

The temporary drop in activity at the biggest of the six major US liquefaction facilities, which could persist through the weekend, comes as weak demand in Asia and additional incremental supplies hitting the market offer bearish signals for prices for cargoes destined for the key importing region, according to an outlook from S&P Global Platts Analytics.

That dynamic would further pressure netbacks and possibly push more supplies to Europe in search of the best return. In the meantime, US export facilities continue to see high utilization, with long-term contracts underpinning the bulk of the capacity.

In countries that have more spot exposure or weaker demand from oil-indexed buyers, some producers have been lowering utilization rates, Ira Joseph, Platts Analytics' head of global gas and power, said Thursday. Platts Analytics expects that US utilization rates will eventually settle into more traditional global levels.

Asian demand growth "is nowhere near where we need it to be based on the incremental supply coming into the market," Joseph said.

He cited "anemic" growth numbers coming out of Japan and South Korea and the fact that "China is simply not growing enough."

"That does not bode well for price," Joseph said.

December prices for spot cargoes delivered into Northeast Asia, the largest demand market for LNG in the world, plunged 40% year on year. The average Platts JKM price assessed in December 2018 was $8.960/MMBtu versus $5.410/MMBtu last month.

Meanwhile, pilot services for tankers moving through the channel leading to Sabine Pass have been suspended since Monday afternoon due to heavy fog throughout the Port of Lake Charles and along the Louisiana Gulf Coast. A notice Thursday to shippers in the area said the fog was expected to last through January 19.

The sustained suspension has caused feedgas deliveries to the export facility to decline from 4.2 Bcf/d on Sunday to just 1.87 Bcf/d on Thursday, Platts Analytics data show. Flows on the systems of Natural Gas Pipeline Co. of America and Transcontinental Gas Pipe Line recorded the largest declines, falling 700 MMcf/d and 760 MMcf/d, respectively, since last weekend.

A Cheniere spokesman declined to comment on the drop in feedgas flows to Sabine Pass, though he did not dispute that fog was the primary reason.

As of Thursday afternoon, there was one vessel, the Maran Gas Apollonia, moored at the export terminal, with three other vessels anchored offshore, according to Platts' cFlow trade flow software.